Projects linked to ammonia and hydrogen are leading the way in the global rollout of CCS, while cement is an early frontrunner in the hard-to-abate sectors, according to Damien Gerard, vice-president of CCS at global technology company SLB. Looking ahead, carbon markets, state funding and the development of green premium markets will all have a role to play in enabling CCS deployment at scale, he told Carbon Economist in an interview ahead of Gulf Energy Information’s recent CCS Strategy Europe conference in London.
From your perspective, how has the CCS sector performed in the first half of this year?
Gerard: Halfway through the year, there is quite a delta between what we had originally planned and where we are today. This is down to a mix of competing forces, where you have a few positive forces, pushing things faster in some geographies, but also some counterproductive forces in some other markets.
If you look at the key markets, for example, the US, the fact that you have an election later this year, the fact that some key projects have faced some headwinds with things like common infrastructure and pipelines, this has certainly led to a bit of slowdown by some of the project developers.
How could the US elections impact CCS policy?
Gerard: We expect to see things move forward, regardless of who wins, as it makes sense as part of the global economy around decarbonisation. In the US specifically, the market pace is heavily dependent on the Inflation Reduction Act (IRA) and the 45Q tax credit.
The 45Q tax credit is a bipartisan law that receives support from both sides of the aisle. We do not expect it to be affected one way or the other, regardless of who wins the election. With the IRA, however, if there is a change of administration, you could see an impact to the financing packages, but it is difficult to predict to what extent.
If significant changes are implemented to affect funding of early projects, there would be a race to reduce costs, which is the focus of the market anyway, but it is not easy to achieve without support. Thus, other mechanisms, from public or private actors, would be needed to fill the financial gap. Ultimately, getting access to finance is where we could see an impact on the speed of development.
Outside the US, which are the new emerging CCS markets to watch?
Gerard: We see other markets emerging quickly, places like Brazil where, even without policy support, developers are finding ways to get on with projects, especially in the ethanol industry.
In Southeast Asia, Malaysia and Indonesia are actually developing much faster than others. Maybe in part this is because of the way presidential decrees are enacted in those countries, pushing industries overnight to get on with some CCS activities. Maybe this is also because they are a bit less picky in terms of having to dot all the ‘i’s and cross all the ‘t’s on every aspect of the value chain. And so you can possibly expect some of these markets to leapfrog Europe and other established markets.
Let us talk more about the cost challenges facing CCS.
Gerard: Costs will vary from industry to industry. But if you look at the total cost of an abated tonne of CO₂, it is probably going to be, for hard-to-abate sectors, around $100/t or €100/t [$108.2/t]. So, if you have $85/t of tax credit, you still have a gap.
If you have an €80/t EU ETS price today and the market is fluctuating tomorrow, you are facing some volatility.
The cost gap is not huge, but given the uncertainty around EU ETS prices, and given the relatively short timeframe of the 45Q tax credit of 12 years, this gap is significant and still represents a few hundred million dollars or euros.
You can only close that gap by public funding, which is exactly what emitters are doing. They are going after the billions of dollars of either the IRA and Department of Energy funding in the US or the EU Innovation Fund and other sovereign funds in Europe.
And then, as you scale up, you could complement that support with a market mechanism such as the voluntary carbon market. You could also have a green premium mechanism by which you capture a premium for products that are decarbonised. And some companies are starting to do that. In the cement industry, you can today go to the store and buy a green bag of cement.
So once you start stacking that up on top of your policy support and your cost avoidance under the EU ETS, then you have a mechanism. But it is very immature and not very liquid, so it will take some time come together.
In terms of industrial sectors, where do you see the most potential for CCS?
Gerard: In terms of industry, anything that is linked to ammonia and hydrogen is certainly at the forefront. You have CO₂ coming out of the of the process in very high concentrations, so it is a natural starting point.
Where it starts to become more difficult is in the hard-to-abate industries. And here, the cement industry, for example, has started to make some significant strides over the last 18 months.
We are working with Cemex on a carbon capture project in the US and large EU cement manufacturers across most of Europe and the Middle East and North Africa.
The new SLB and Aker Carbon Capture ASA joint venture is advancing completion of the first carbon capture on a cement plant. These are very important milestones for the industry. Once you see a CCS plant working for cement, whatever the technology it is, the point is that you can capture the CO₂ from a cement plant and dispose of it and make green cement.
What about CCS deployment in the steel sector?
Gerard: Steel is still in a phase where there are a few key options in front of the industry. It will be on a case-by-case basis, depending on the type of plant—electric arc furnace, blast furnace or direct-reduced iron.
One important aspect with steel is the industry’s mindset on recycling—not having waste out of the steel manufacturing process and reusing scrap, for example. So, steelmakers see CO₂ not as waste, but as a useful product to do something else with.
The question is, how do you square the equation around the volume of CO₂ that you typically have from a steel plant—multimillion tonnes—with the use case: whether it is producing fuel or construction materials?
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